Salary Concept
Salary is the income that the employees receive in exchange for the work given in the productive process. By other words, salary isn’t more than the price paid to the employees in exchange of a certain work quantity. Being a price, the salary is established, like any other price, in the market (in this case the work market) through the meeting between who offers work (employees) and who searches it (companies).
Nominal Salary vs. Real Salary
Given that the salary is the main income earned by the families, it’s the salary that determines the consumption of these families. For this reason, salary is analyzed not only in monetary terms (the called nominal salary), but also in goods’ quantity terms that with it can purchase (the real salary). This way, the issue of the salary variations is intimately connected with the prices variations: if, for example, the salaries increase less than the prices general level (being, then inflation), the goods’ quantity that the employees can purchase is reduced, being, despite the nominal salary having increased, the real salary reduced – it’s said that the employees suffer a break in the purchasing power.
